The dangerous thing about gambling is that you happen to win sometimes just by chance. The gambler is quick to take credit for successes, but can always find some external factor to blame for losses.
Case in point: my Kentucky Derby picks. I picked three horses out of twenty starters: one to win, one to place, and one to show. The horse I picked to win had some terrible luck, hurting his ankle and eventually finishing 19th.
The horse I picked for second, I’ll Have Another, ended up winning the race. Bodemeister, my third-place pick, finished second. A two dollar exacta-box on my top three horses would have cost $12 and would have returned $306.
I also picked a horse to finish last, Daddy Long Legs, and he indeed finished dead last.
So, like the gambler I am, I take credit for the good outcomes, and write off my horse finishing 19th as merely bad luck.
And, of course, that means I will push my luck on the Preakness, which goes off today.
I wish I had more exciting picks, but this time my algorithm likes the two favorites, Bodemeister and I’ll Have Another. For third, I’d go with Optimizer.
Every year I post Kentucky Derby picks.
Every year they turn out to be terrible.
Every year I vow I will not embarrass myself again next year.
Every year two or three loyal readers email me and ask why I didn’t post my picks this year, so then I post picks after all.
So, against my better judgment, here they are.
About a year ago, I blogged about how odd the pattern of chicken wing prices was at my local Harold’s Chicken Shack. Here was what they were charging for their wings:
2-wing meal $3.03
3-wing meal $4.50
4-wing meal $5.40
5-wing meal $5.95
6-wing meal $7.00
It is quite odd because they gave you a big discount on the fourth and fifth wings, but charged you a lot for the sixth wing. There were many incongruities throughout the menu.
Since that time, Harold’s has invested in a fancy new menu up on the wall above the bulletproof glass that protects the workers from the customers. I’ve also invested in a fancy new phone that actually takes pictures, unlike the phone I carried a year ago. So this time, instead of having to write down all the prices, I just snapped a photo.
Time magazine has a poignant story (which is gated) and video (which is available) on Dr. Peter Goodwin, one of the advocates who helped get assisted suicide laws in place in Oregon and Washington.
Goodwin himself, at the time of the interview, suffered from a degenerative disease that was in the process of killing him and had to decide whether he wanted to take his own life.
The interview is the last one he gave before his death.
Blog reader Becky Roser sent an interesting email recently:
My father pointed out something interesting the other day – almost no one runs out of gas anymore. When gas was $0.60 a gallon, he maintains it happened all the time. Now that it’s $4.00, you almost never see it. I have vague memories of my father running out of gas when I was very young, but I’ve never done it. What changed?
Last week, we solicited your questions for economist Daron Acemoglu and political scientist Jim Robinson, who just published a new book called Why Nations Fail: The Origins of Power, Prosperity, and Poverty
Their thoughtful responses below cover everything from robber barons to the artificial construction of African nations to whether the race of a country’s leaders determines its success. A big thanks to Daron, Jim, and all our readers for another great Q&A.
First, a note from Daron and Jim: “We thank everybody for these excellent questions and comments. We had to pick a few to be able to provide detailed answers.
When it comes to economic ideas, Daron Acemoglu never thinks small. Widely acknowledged as one of the most insightful economists alive, Daron seems to have brilliant things to say about any and all things economic.
When you have that sort of gift, you might as well go after the biggest problems imaginable. Thus his latest book, Why Nations Fail
It is an awesome piece of work. So full of ideas and wisdom, but still so easy to read. I just love it. Daron and Jim have agreed to take your questions about their new book, so please leave them in the comments section below. To get you started, here’s the table of contents:
My colleague Glen Weyl and Eric Posner at the University of Chicago Law School, argue in a recent white paper, that new financial products should be subject to regulatory approval analogous to that for new drugs by the Food and Drug Administration. Here is the abstract:
The financial crisis of 2008 was caused in part by speculative investment in sophisticated derivatives. In enacting the Dodd-Frank Act, Congress sought to address the problem of speculative investment, but merely transferred that authority to various agencies, which have not yet found a solution. Most discussions center on enhanced disclosure and the use of exchanges and clearinghouses. However, we argue that disclosure rules do not address the real problem, which is that financial firms invest enormous resources to develop financial products that facilitate gambling and regulatory arbitrage, both of which are socially wasteful activities.
Close your eyes. Imagine what it would feel like to run a marathon. Now imagine that you’ve run not just one marathon, but two marathons in a single day. Seems crazy. Now imagine you’ve run two marathons in a day, every day, for 10 months straight without a day off!
Meet Pat Farmer. He’s an ultramarathoner from Australia who is in the process of running from the North Pole to the South Pole. He covers 50 miles a day, except when he is using snow shoes near the poles. He only manages 16 miles a day in snow shoes.
A blog reader sent a message to her congressman, Tim Walz, complaining about SOPA, the bill that aims to protect intellectual property rights online that has sent many internet folks into a tizzy.
Here is the response she got from Congressman Walz:
…SOPA approaches the problem as a criminal matter when in fact, study upon study shows that online piracy is best dealt with as an economic matter. Instead of using the Justice department as a sledgehammer amongst the delicate weeds of the internet, corporations must embrace the free market and adapt their business models to compete in a new reality. The ability to adapt and compete is the cornerstone of capitalism, we should promote this rather than rushing to insert ourselves in the market in ways that could severe disrupt internet commerce and progress.
Now, I don’t 100 percent agree with this answer, but I love the spirit of it – especially coming from a Democrat! That last sentence sounds like the argument you would get over faculty lunch in the University of Chicago department of economics.
I don’t particularly like math. I’ve never been a fan of magic either. For some reason, however, when I heard about a new book entitled Magical Mathematics
I have to say that it is really good, and I would highly recommend it to any nerd. It is a really artful melding of card tricks that are remarkable, with explanations of the underlying math concepts that are at one level so simple and clear that almost anyone could get the basic intuition for what they are talking about, but at another level so deep and difficult that it is probably hopeless for someone like me to ever truly understand.
Last spring, I jokingly (okay, maybe half-jokingly) wrote about my quest to make the Champions Tour, the professional golf tour for people over the age of 50. In that post, I made reference to the ideas of Anders Ericsson, an old friend whom Dubner and I wrote about in our New York Times column back in 2006, and whose ideas later became the centerpiece of a number of popular books. Anders is the one who thinks that talent is unimportant. Oversimplifying a bit, he argues that with 10,000 hours of the right kind of deliberate practice, more or less anyone can become more or less world-class at anything. I’ve spent 5,000 hours practicing golf, so if I could just find the time for 5,000 more, I should be able to compete with the pros. Or at least that is what the theory says. My scorecards seem to be telling a different story!
It turns out I’ve got a kindred spirit in this pursuit, only this guy is dead serious. A few years back, twenty-something Dan McLaughlin decided he wanted to play on the PGA tour. Never mind that he had only played golf once or twice in his life and had done quite poorly those times. He knew the 10,000 hour argument, and he thought it would be fun to give it a test. So he quit his job, found a golf coach, and has devoted his life to golf ever since. So far he is 2,500 hours into his 10,000 hour quest, which he chronicles at thedanplan.com.
I recently visited India for the first time, spending a grand total of 30 hours there. During that time, however, my experiences ran the gamut. I spent the day in the Zakhira slum in New Delhi, and then just a few hours later, enjoyed a sumptuous dinner sitting next to former Australia Prime Minister John Howard, his wife Janette, and other luminaries.
My first impression of India was that the chaos on Indian roads was beyond belief: people walking and riding bikes on what appear to be freeways, motorcycles with three riders, open trucks crammed with people, the constant din of honking everywhere by everyone. On top of that, the people driving me never seemed to know how to get anywhere. It took over an hour to get from the airport to my hotel, a seemingly endless series of turns (including numerous u-turns) and my driver rolling down his window and yelling for directions at nearly every stoplight. I was surprised when the return trip to the airport, with a different driver, took only 20 minutes and was nearly a straight shot. I will say, however, that I saw only one cow on the trip.
We’ve had the good fortune over the last few years here at the blog to bring you occasional nuggets from University of Arizona economist Price Fishback, whose research on the Great Depression often offers powerful insights about our current economic situation.
Price’s latest contribution to the blog, this time joint with Ken Snowden from UNC-Greensboro, discusses the Home Owner’s Loan Corporation, which bought and refinanced 1 million severely delinquent loans between 1933 and 1936. Did things works out well or poorly? You’ll have to read on to find out. And if you like what they’ve written, keep an eye out for their soon to be released book (with Jonathan Rose as a third author).
Learning from the Last Great Mortgage Mess
By Price Fishback and Ken Snowden
For the past four years, the U.S. has faced a housing crisis that shows no signs of ending. The situation was similar in June 1933 when the Home Owners’ Loan Corporation was created to address the nation’s last severe mortgage crisis. Some have suggested that a new HOLC could help resolve the current crisis, but their characterizations of the HOLC have been incomplete. Our goal here is to summarize recent research that provides a fuller picture of the HOLC and its impact on housing markets in the 1930s.
Does it make sense that we have gotten worse at making violins over the last 300 years, when we have gotten so much better at making just about everything else? Not really. Finally there is some experimental data on the subject, and it doesn’t look good for those who pay top dollar for fancy old violins.
(Hat tip to Dean Strachan)
There is an old quip, attributed to George Bernard Shaw, that if all the economists were laid end to end, they’d never reach a conclusion.
My own experience has always been just the opposite. Most economists think very much alike.
If you want to feel like the smartest person in the room, often a good way to accomplish this is to be the only economist. Frequently, the one economist will say things that make a lot of sense that no one else would ever come up with. When I am that one economist, I sometimes feel like a genius. Until a second economist enters the room, that is. Because when the second economist shows up, he or she often says all the smart things I was going to say, before I can say them. It turns out, it is not the economist who is brilliant, but rather the training we get as economists which leads us to think differently from non-economists, that sometimes makes us seem smart.
I’m going to be in India this week, just for a few days. My time is completely booked except for a few hours on the morning of Friday, Dec. 2. I’m looking for an NGO that works with the downtrodden in New Delhi and is willing to show me around some poor neighborhoods there. In return, I will donate $5,000 to that NGO in appreciation.
Can any blog readers provide guidance on this? I know it is short notice.
One of the first times I met Danny Kahneman was over dinner, just after SuperFreakonomics was published. Shortly after we were introduced, Danny said, “I enjoyed your new book. It will change the future of the world.” I beamed with pride at this compliment. Danny, however, was not done speaking. “It will change the future of the world. And not for the better.” While I’m sure many people would agree with his last sentence, he was the only person who ever said it to my face!
If you don’t know the name, Danny Kahneman is the non-economist who has had the greatest influence on economics of any non-economist who ever lived. A psychologist, he’s the only non-economist to win the Nobel Prize in Economics, for his pioneering work in behavioral economics. I don’t think it would be an exaggeration to say that he is among the 50 most influential economic thinkers of all time, and among the ten most influential living economic thinkers.
I recently had one of the strangest customer service episodes I’ve ever experienced. It took place at Café Bon Appetit in downtown Chicago. A group of twenty of us were eating lunch there. It is one of those places that has many food stations to choose from, then you pay for your food and find a table. There is no table service. It’s a huge restaurant. I don’t think it’s an exaggeration to say that the restaurant can seat 300 people. That is one of the reasons we go there in a big group — there are always plenty of seats.
One of the diners, who is on some sort of vegan, non-gluten health kick, had brought her own lunch. The rest of us had bought our lunch there. We found a table in the nearly completely empty back seating area. About halfway through lunch, the restaurant manager appeared. I assumed it was to thank us for coming and to ask how the food was. It turned out his mission was quite different.
I first met Roland Fryer a decade ago. It didn’t take me long to figure out he was a genius. It took the folks at the MacArthur Foundation a little longer to come to that realization, but they finally got on board last week when they gave Roland one of their high-profile MacArthur “Genius” Awards.
Most of Roland’s research has been devoted to understanding the factors influencing Black economic progress. He’s worked on segregation, the sources of the Black-White test score gap, the reasons why Black longevity is less than that of Whites, and the Ku Klux Klan, among many other topics.
It sounded like a small explosion. That was the first hint that my dream was dying. I was standing on a driving range in Florida. Because I am completely and utterly obsessed with golf, there is no place I would rather be. It makes no sense, but I’ve stopped trying to rationalize it.
As much effort as I invest in golf, I’ve never really had any expectation that I would be an outstanding golfer. So when I’ve had the chance to play with some of the world’s very best golfers, like Luke Donald and Jason Day, it was not the slightest bit discouraging to see, up close, just how much better they are than me. I fully expected them to be as amazing as they are.
All my life I have been far more obsessed with how far I could hit a golf ball than with making low scores. I was an extremely short hitter as a kid, and much of my adult life has been devoted to making amends for that weakness. I’m still not an exceptionally long hitter, but I have probably added 40 yards to my average drive in the last four years. Those gains have fueled the (surely irrational) dream that perhaps I could add another 40 yards over the next four years, in which case I would be a long driver.
A year ago, my wife said to me, “I need you to do me a favor.” I knew that was bad news. A charity she is heavily involved with, Half the Sky, was planning an event in Chicago and she had volunteered me to be the speaker.
In principle, this was no big deal. I speak in front of groups all the time. I can talk about Freakonomics, SuperFreakonomics, and my academic research in my sleep.
I knew immediately, however, that this speech would be completely different. Although I often tell stories about myself and my life, they are never stories about emotions. I am one of the most closed off people you’ll ever find when it comes to emotional topics. I have never learned, or really even tried to learn how to express emotions. I’m not proud of this, it just is the truth.
There was no way, however, that I could speak at a Half the Sky event without opening up my emotions. Half the Sky is an amazing charity – perhaps one of the world’s best – doing incredible work with Chinese orphanages. The only events that ever fully penetrated my emotional wall were the death of my son Andrew and the subsequent, deeply moving process of adopting a daughter (eventually two daughters) from China. More than a decade later, the emotions associated with these two events remain shockingly raw, hiding just below the surface.
James Barron and Sydney Ember write in the New York Times about the upcoming closure of the crown of the Statue of Liberty. If you are skeptical of how the government spends money, this article will fuel your fire.
Barron and Ember write:
Interior Secretary Ken Salazar says it [the crown of the Statue of Liberty] needs a $27.25 million renovation for additional safety improvements that he promised in 2009.
My guess is that, even by government standards, this is a project where the safety benefit per dollar spent is miniscule, or non-existent.
With the exception of a few road course races, most of the NASCAR races are held on ovals. The cars always race counter-clockwise on the ovals, meaning the cars only turn left.
Given all the attention that learning and expertise has been getting, I’m deeply curious as to what would happen if for one race NASCAR went in the opposite direction, so that it was all right turns. I understand that they would probably have to do a lot of work to the cars, because the cars must be optimized for left turns, but put that aside. Would lap times be appreciably worse because the drivers would have trouble cornering? Would there be more crashes? Would the same drivers excel?
I think NASCAR should give it a shot. It would generate a lot of interest. I suspect, both among hardcore NASCAR fan and more casual sports fans.
I’ve even got the obvious name for the race: The Rite Aid 400.
I recently had the chance to read an advance copy of an outstanding book by Daniel Kahneman entitled Thinking, Fast and Slow. The book will be published this fall.
Among the hundreds of interesting ideas in the book, there is one that I simply can’t get out of my head. Referring to how our minds work, Kahneman writes that not only are we sometimes “blind to the obvious,” but also we are “blind to our blindness.” For me, that one sentence summarizes a fundamental insight of his life’s work.
It’s one of those simple insights which is obvious when you think about it, but somehow incredibly easy to forget when mesmerized by the happenings of everyday life, leading to poor decision making.
Coming up with a good name for a problem is often an important part of coming up with a solution. So I’m thankful to Kahneman for planting the phrase “blind to my own blindness” in my brain. The next time I’m about to mindlessly make a terrible choice, I’m hoping that phrase will forcefully interject itself into my internal dialogue, causing me to think more clearly about my decision.
More likely, it will only be after the fact that I become aware that I was blind to my own blindness in a particular setting. At least I’ll have a succinct way of beating myself up.
My good friend and co-author Tim Groseclose has a new book out entitled Left Turn: How Liberal Media Bias Distorts the American Mind. As the title suggests, it has a definite conservative slant. It is not, however, a right-wing rant by any means. Rather, it is a carefully researched and amusingly written book by a highly regarded academic.
I’m bored to death by politics. So I didn’t expect to enjoy Groseclose’s book, but I really did. I’m always surprised when an academic can write for a general audience, but Groseclose definitely has that gift.
As I said in my blurb for his book, liberals will not like what Groseclose has to say, but that is all the more reason why liberals should read his book.
In our books, Dubner and I have argued that economic analysis (at least the way we try to do it) is neither moral nor immoral. We try to start with a question, obtain a set of facts, and then understand where those facts lead, trying not to be prejudiced one way or the other by moral considerations when coming to a conclusion.
Similarly, I’ve never really thought of markets as being moral or immoral.
Mark Zupan, the dean of the University of Rochester’s William E. Simon School of Business, thinks differently. In a recent piece, Zupan makes an argument that most people will find counterintuitive: he claims that free markets foster integrity and cooperation. I’m not sure I fully agree with him, but the basic idea is sensible and straightforward. Markets lead to firms that survive for long periods of time. Reputations are important to firms, which leads them to behave in virtuous ways, not because they’re inherently moral, but because virtue is good for business in the long run.
I always love it when I’ve been doing something one way my whole life, and then someone explains to me there is a better way to do that same thing, and the new way is so simple I can immediately switch and see benefits.
Usually it is a new technology that unlocks the magic. For instance, XM Radio, iTunes and Pandora all fundamentally changed the way I listen to music. My Sonicare toothbrush is a hundred times better than a regular toothbrush. After the creation of seedless watermelons, I would never again intentionally buy one that had seeds. Microwave popcorn is another example.
What is even neater, I think, than a new technology changing things, is when someone just comes up with a better way of thinking about a problem. I’ve done a little bit of reading on the origins of randomized experimentation, and it is fascinating to see how that new and powerful idea emerged.
On a much smaller scale, I’ve recently had that sort of change in my thinking about another issue: how to read putts on the green when playing golf.
A few months back, hundreds of thousands of pages of U.S. government documents were made available to the public through WikiLeaks. I have to say that, at the time, I thought this would be a history-making event. I figured there would be loads of interesting and controversial revelations in the documents. Huge scandals would emerge; heads would roll.
I was recently reminded, while reading a months-old copy of The Economist, just how little of interest has thus far emerged from the documents. The U.S. ambassador to Ecuador was sent home by the Ecuadorians because she had written a leaked cable saying (gasp) that the Ecuadorian police were corrupt. The article mentioned that a similar fate had befallen the American ambassador to Mexico.
Is that it? Is there nothing of importance in State Department cables?
Last week, the Supreme Court ordered California to release at least 30,000 prisoners due to poor prison conditions caused by overcrowding.
This is what economists call a “natural experiment,” or what I prefer to call an “accidental experiment.” The Supreme Court order will be a “shock” to the California prison system, leading to roughly a 10 percent reduction in the prison population there. I used this sort of accidental experiment in a paper I published back in 1996, finding a large impact of mandated prison releases on state crime rates. If my estimates remain relevant to the current time period, I predict that California violent crime rates should rise about 4 percent relative to the rest of the U.S. over the next few years. That adds up to about 80 extra homicides a year.
Five years from now, no doubt, an economics graduate student will analyze the data and tell us what the actual numbers look like. Unless, of course, I beat them to the punch!
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